What is the Role and Importance of an Advisory Board?


Running a business or organisation can be a challenging process, especially when navigating complex decision-making. This is where the concept of an advisory board comes into play. But what exactly is an advisory board, and what do they do? In short, an advisory board is a body that provides strategic advice to the management of a corporation or organisation. Unlike a board of directors, advisory boards do not have a binding decision-making authority but play a vital role in offering guidance and expert insights.

Key Points

  • Advisory boards have no binding decision-making power but play a key advisory role.
  • They are distinct from management committees or boards of directors which are part of the Corporations Act 2001.
  • Members of advisory boards are not charged with fiduciary duties.
  • Advisory boards do not have a recognised legislative mandate, with some exceptions in the public sector.



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What is an Advisory Board?

As their name suggests, advisory boards are groups of individuals chosen to provide advice and guidance to a company or organisation's board of directors and/or management. However, it is important to note that while their role is invaluable, advisory boards do not have the authority to make executive decisions for the company or organisation. One might ask, "What do advisory boards do?" Well, while their role varies among different businesses, typically, their primary function is to offer strategic advice to aid in making the most informed decisions possible.

What is the Role of an Advisory Board?

Advisory boards do not have binding decision-making authority, unlike a board of directors. This difference is highlighted in the Corporations Act 2001 (Cth), where the roles and responsibilities of a board of directors, management committee, or council are distinctly defined. However, the advisory board's role should not be undervalued. Advisory board members are typically brought in for their wealth of expertise and experience, and can offer insights on industry trends, business strategy, and market conditions that could prove invaluable to the board of directors' decision-making process.

What are the Responsibilities of Advisory Board Members?

Though they are expected to provide their expert opinions with due care, members of an advisory board do not have fiduciary duties. Their primary responsibility is to act as a resource for the board of directors and/or management, providing advice and guidance based on their specialised knowledge and experience.

Does an Advisory Board have a Legislative or Regulatory mandate?

Advisory boards typically do not have a recognised legislative or regulatory mandate, nor a constitutional base. As such, they do not have any official or legal obligations. Nevertheless, there may be exceptions, particularly within the public sector, where they may be legislated in certain contexts. Regardless, it is essential to acknowledge the advisory board's unique value in providing seasoned advice and perspective to help guide the direction of an organisation.

Understanding the unique role of advisory boards is essential for any organisation aiming for sustained growth and success. As you progress in the world of governance, it is worthwhile considering how an advisory board could be beneficial to your organisation in providing expert insight and strategic advice. The Australian Institute of Company Directors is committed to championing excellence in governance. We hope this article can help clarify the function and value of an advisory board.

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